Why commercial bank lending is important for a country’s economic health and GDP of a particular country? What is the percentage of domestic credit to the private sector in the USA? Can you say if it is it increasing or decreasing since 2004 to 2019? What is an important reason for the fluctuation?

Assignment #2

Write an about 2-page paper to explore the issues related to the stock market and the bond market.

If possible state the source of data/information you may use.

Find the total stock market capitalization in the US in 2020 (Worldbank data) and the bond market size in 2021. How were these numbers in 2009 during the height of the 2008/2009 recession? Would you expect, in the Commercial Paper market, the Yield Curve (interest rate) for bonds in a recession to be high or low? During the previous recession of 2008 / 2009 the Commercial Paper market froze and the Federal Reserve intervened to inject cash into the market. How can we understand/think about it? How about demand of junk bonds by investors in a recession period versus a strong economic growth period? How can we can understand/think about it?

Why commercial bank lending is important for a country’s economic health and GDP of a particular country?

What is the percentage of domestic credit to the private sector in the USA? Can you say if it is it increasing or decreasing since 2004 to 2019? What is an important reason for the fluctuation?

According to the forthcoming book of Professor Ken Rogoff, what can be reasons for the gradual limitation of dollar bills in the US economy? Provide a list of them.

Provide a brief explanation of each” Frictional versus Cyclical versus Structural unemployment. In general, would you think that stimulating the economy through interest rates/monetary policy, the Federal Reserve/government may reduce structural unemployment? Would you think that stimulating the economy through interest rates/monetary policy, the government may reduce cyclical unemployment? Would you expect currently structural unemployment levels to be more/less pronounced in developed or developing economies? What could the government do to alleviate structural unemployment? What are the implications of structural unemployment to Labor Participation Rate in the US? Is there any difference among workers with different educational achievement?

Deflation was considered a problem for several economies in the past decades. Can you elaborate about the negative (and maybe positive?) effects of deflation? For a particular economy, do economists pay more attention to Core or Headline inflation? What are the arguments in support or against?